Metsä Group s operating result for January March was EUR 89 million excluding non-recurring items

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1 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 1 (29) Metsä Group s operating result for January March was EUR 89 million excluding non-recurring items Result for the first quarter of 2013 Sales amounted to EUR 1,261 million (1 3/: EUR 1,284 million). Operating result excluding non-recurring items was EUR 89 million (53). Operating result including non-recurring items was EUR 94 million (45). Result before taxes excluding non-recurring items was EUR 57 million (18). Result before taxes including non-recurring items was EUR 62 million (10). Return on capital employed excluding non-recurring items was 9.7 per cent (5.7). Due to increase in working capital, cash flow from operations amounted to EUR -20 million (43). Events during the first quarter of 2013 Pulp prices increased slightly during the period. Folding boxboard orders strengthened and delivery volumes increased from the previous quarter. The demand for linerboard continued to be strong. The bark gasification plant at Metsä Fibre s Joutseno mill was inaugurated. The Alizay mill site in France, including all equipment and buildings, was sold to Conseil Général de l Eure, representing the French government, for EUR 22 million. An agreement was concluded on the divestment of the shares of Metsä Wood Merk GmbH to the German group Ed. Züblin AG. The transaction was closed on 22 April Events after the period Katrinefors Kraftvärme AB, a joint venture in which Metsä Tissue has a 50 per cent holding, announced that it will build a bioenergy plant in conjunction with the Metsä Tissue mill in Mariestad, Sweden. The plant will be operational by the end of The total investment will amount to EUR 30 million. Metsä Wood announced that it will launch an efficiency programme. The reasons for this are the weak development of productivity over the last few years and declining sales in the main markets. The reduction of workforce is not expected to exceed 255 employees, of which an estimated 95 will be in Finland. Metsä Tissue signed a EUR 200 million syndicated loan agreement. The loan is a five-year credit facility to refinance the current facility maturing in September Metsäliitto Cooperative acquired on 2 May 2013 from Varma Mutual Pension Insurance Company all its holdings in Metsä Tissue Corporation, representing a total of 8.38 per cent of Metsä Tissue s share capital.

2 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 2 (29) All of our business areas improved their operating profit for the first quarter compared to the previous year. The wood supply business has been active, the profitability of tissue and cooking papers continued to develop favourably and increased folding boxboard order inflow provides a good foundation for the future development of our paperboard business. Metsä Group has been investing in increasing the production and utilisation of bioenergy at its mills for years. Of the fuels used by the Group, 80 per cent is woodbased, and therefore our fossil carbon dioxide emissions have decreased by 27 per cent in The Joutseno pulp mill is carbon dioxide-neutral in normal operation due to the new bark gasification plant, and we are also aiming for similar developments at our other pulp mills. The use of renewable energy is also increasing in Sweden, with the bioenergy plant planned in conjunction with the Mariestad tissue paper mill due for completion at the end of next year. Uncertain market conditions continue to impair the accuracy of business forecasts and the market development visibility beyond one quarter is poor. Kari Jordan, President & CEO, Metsä Group

3 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 3 (29) Metsä Group Income statement, EUR million The figures for are restated Sales Other operating income Operating expenses Depreciation and impairment losses Operating result Share of profit from associates Exchange gains and losses Other net financial items Result before income tax Income taxes Result for the period Profitability The figures for are restated Operating result, EUR mill , excluding non-recurring items % of sales Return on capital employed, % , excluding non-recurring items Return on equity, % , excluding non-recurring items Financial position The figures for are restated Equity ratio, % Net gearing ratio, % Interest-bearing net liabilities, EUR mill Segments Sales and Operating result January March 2013 (EUR mill.) Wood Supply & Forest Services Wood Products Industry Paperboard and Paper Industry Tissue and Cooking Papers Pulp Industry Sales Other operating income Operating expenses Depreciation & impairment losses Operating result Non-recurring items Operating result, excl. non-rec. items % of sales Metsä Group is a responsible forest industry group whose products main raw material is renewable and sustainably grown Nordic wood. Metsä Group focuses on tissue and cooking papers, consumer packaging paperboards, pulp, wood products, and wood supply and forest services. Its high-quality products combine renewable raw materials, customer-orientation, sustainable development and innovation. Metsä Group s sales totalled EUR 5.0 billion in, and it employs approximately 11,500 people. The Group operates in some 30 countries. Metsäliitto Cooperative is the parent company of Metsä Group and is owned by approximately 125,000 Finnish forest owners.

4 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 4 (29) Comparative data Metsä Group adopted the amended IAS 19 Employee Benefits standard retroactively on 1 January Metsä Group s members funds decreased by approximately EUR 29.9 million as a result of the amendment on 31 December, the operating profit for improved by EUR 4.0 million, and financial expenses increased by EUR 5.2 million. The figures for have been restated to correspond with the amendments made during the 2013 financial period. KEY FIGURES, restated EBITDA IAS 19 restatement EBITDA EBITDA excl. non-rec. items IAS 19 restatement EBITDA excl. non.-rec. items Operating result IAS 19 restatement Operating result Operating result excl. non-rec. items IAS 19 restatement Operating result excl. non-rec. items Result before income tax IAS 19 restatement Result before income tax Equity ratio, % IAS 19 restatement Equity ratio, % Net gearing ratio, % IAS 19 restatement Net gearing ratio, % ROCE excl. non-rec. items, % IAS 19 restatement ROCE excl. non-rec. items, % ROE excl. non-rec. items, % IAS 19 restatement ROE excl. non-rec. items, % EBITDA = Operating result before depreciation and impairment losses ROCE = Return on capital employed ROE = Return on equity The new and amended standards adopted at the beginning of 2013 and their impact on the balance sheet and statement of comprehensive income are described in more detail in the notes to this interim report.

5 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 5 (29) METSÄ GROUP INTERIM REPORT 1 JANUARY 31 MARCH 2013 The Interim Report is unaudited Sales and result Metsä Group s sales in January March totalled EUR 1,261.1 million (1 3/: EUR 1,283.9 million). Closed and restructured units decreased the Group s sales by approximately EUR 45 million year-on-year. The operating result excluding non-recurring items was EUR 89.0 million (53.0), or 7.1 per cent of sales (4.1). Operating profit improved in all business areas compared to the corresponding period the previous year. The most significant improvement was seen in Paperboard and Paper, EUR 24.1 million. The operating result was improved by a significant increase in folding boxboard and linerboard delivery volumes and an increase in the prices of short-fibre pulp and chemi-thermomechanical pulp. Furthermore, closed and restructured units improved the operating result by approximately EUR 11 million. The non-recurring items recognised in the first quarter totalled EUR +5.2 million (-7.9), of which EUR 4.6 million was related to the sale of the Alizay mill site and EUR 0.6 million to the reversal of a provision related to Metsä Tissue s efficiency programme. The operating result including non-recurring items more than doubled in January March to EUR 94.2 million (45.1). Results from associates were EUR 6.7 million (-1.0), financial income was EUR 1.2 million (1.6), net exchange gains in financial items were EUR 0.2 million (1.3) and financial expenses were EUR 39.9 million (36.9). The increase in financial expenses was due to Metsä Board s early repayment of the USD 121 million loan maturing in June The result before taxes for the period was EUR 62.3 million (10.1) and taxes, including changes in deferred tax liabilities, were EUR 16.0 million (8.5). The net result for the period was EUR 46.3 million (1.6). Excluding non-recurring items, the Group s return on capital employed was 9.7 per cent (5.7) and the return on equity was 8.8 per cent (2.6). Including non-recurring items, the return on capital employed was 10.2 per cent (4.8) and the return on equity was 9.9 per cent (0.4). Balance sheet and financing Metsä Group s liquidity is good. Total liquidity at the end of March was EUR million (31 December : 1,167.8). This consisted of EUR million (518.5) of liquid assets and investments and EUR million (649.3) of committed credit facility agreements not included on the balance sheet. Liquidity reserve of the Group is complemented by uncommitted domestic and foreign commercial paper programmes and credit facilities amounting to EUR million (526.5).

6 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 6 (29) The Group s equity ratio at the end of March was 35.1 per cent and net gearing was 89 per cent (31 December : 34.8 and 86, respectively). Interest-bearing net liabilities stood at EUR 1,675.6 million (31 December : 1,590.0). Cash flow from operations amounted to EUR million (42.8). During the first quarter, EUR million was tied to working capital (33.4). The equity ratio of the parent company Metsäliitto Cooperative was 62.0 per cent at the end of March and net gearing was 16 per cent (31 December : 61.0 and 21, respectively). During January March, Metsäliitto Cooperative s members capital increased by a total of EUR 13.9 million (5.4). The actual members capital grew by EUR 0.2 million (-0.3), the additional members capital A by EUR 7.2 million (3.8), and the additional members capital B by EUR 20.9 million (1.9). The additional members capital B includes EUR 14.4 million transferred from the additional members capital C. In March, Metsä Board repaid the outstanding USD 121 million part of the USD-denominated private note issue ahead of schedule. After the period, on 2 April 2013, Metsä Board repaid a EUR 500 million bond issue on the due date and withdrew EUR 500 million of the committed syndicated credit facility signed in May. Share pledges, real estate mortgages and a floating charge were given as collateral for the loan. The EUR 100 million revolving credit facility included in the syndicated credit facility is fully undrawn. Of the loans drawn, EUR 150 million will fall due on 30 June 2014 and EUR 350 million on 31 March Metsä Fibre distributed EUR million of dividends to its shareholders in March, of which EUR 50.2 million was paid to Metsäliitto Cooperative, EUR 24.9 million to Metsä Board and EUR 24.9 million to a non-group shareholder. Metsä Board s Annual General Meeting, held on 26 March 2013, decided to distribute a dividend of EUR 0.06 per share, for a total of EUR 19.7 million. Of this, EUR 7.9 million was paid to Metsäliitto Cooperative. The payment date was 10 April Personnel In the first quarter, Metsä Group employed an average of 11,312 people (1 3 : 12,396). At the end of March, the Group employed 11,328 people (31 December : 11,447), of whom 5,389 (5,414) people worked in Finland and 5,939 (6,033) in other countries. The parent company Metsäliitto Cooperative employed 2,650 people at the end of March (31 December : 2,645). Members At the end of the review period, Metsäliitto Cooperative had 123,805 members (31 December : 124,255). During the first quarter, 656 new members joined the Cooperative and 1,106 members cancelled their membership. Investments Metsä Group s capital expenditure totalled EUR 34.8 million (41.6). Metsä Tissue s investment project at the Krapkowice mill in Poland is progressing on schedule. With the Krapkowice paper machine investment, Metsä Tissue will improve the productivity of its operations. The investment is also important for the company s

7 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 7 (29) sustainability goals due to the higher energy efficiency and considerably lower emissions of the new machines. In the summer of, Metsä Wood decided to invest approximately EUR 30 million in upgrading its Vilppula sawmill. The investment will be completed this year. It involves building a new sawmill line and product handling unit and modernising other parts of the sawmill. In the summer of, Metsä Fibre decided to invest in the development of production processes at the Joutseno mill. The mill will adopt a new pulp manufacturing process, polysulphide cooking. At the same time, the production capacity of the Joutseno mill will increase by nearly 10 per cent and production efficiency will improve. With this investment, Metsä Fibre will launch a new type of softwood pulp on the market, which will improve customers cost-efficiency and the technical properties of end products. Construction work began in the autumn of, and the new process will be commissioned in the summer of After the period under review, Katrinefors Kraftvärme AB (KKAB), a 50/50 joint venture owned by Metsä Tissue and the local municipal energy company VänerEnergi AB, announced a EUR 30 million bioenergy plant investment in Mariestad, Sweden, in conjunction with the Metsä Tissue mill. KKAB will invest in the bioenergy plant producing renewable heat and electricity, and with its commissioning, the oil usage of Metsä Tissue s Mariestad mill will decrease by up to 90 per cent. Construction work began in March 2013, and the power plant is due for completion by the end of Business areas Wood Supply and Forest Services Metsä Forest s sales totalled EUR million (404.1) in the first quarter and the operating result amounted to EUR 7.4 million (5.9). In Finland, wood trade was more active compared with previous years throughout the first quarter. Stumpage prices increased slightly for softwood, and the price of pulpwood remained stable. In January March, the Finnish forest industry s purchase volume from privately owned forests was 9.1 million cubic metres (8.5). Metsä Forest actively purchased all grades of timber, including forest energy, through standing and delivery sales. In particular, sites predominated by roundwood, birch pulpwood and energy wood were purchased for winter harvesting. Towards the end of the review period, the demand focused on logging sites harvestable in summer. Sales of forestry services continued to grow at a steady rate. In Russia, the round softwood export licence system still was not operational as planned, causing problems in exports. In the Baltic countries, the market situation of soft pulpwood was quite balanced, but there was slight oversupply of birch pulpwood. In Sweden, the market situation is getting back into balance. Due to favourable weather conditions, wood harvesting and deliveries to customers

8 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 8 (29) production plants went as planned. In January March, wood deliveries amounted to 8.2 million cubic metres (8.3). Various events were arranged for Metsäliitto Cooperative s members, including forest taxation info events. The development of the Metsäverkko internet service was continued by adding new functions for forest owners to use. Wood Products Metsä Wood s sales in January March totalled EUR million (221.8) and the operating result was EUR 4.3 million (4.2). The profitability of operations was at the same level as during the first quarter in. The long winter made sales of building products in the main market areas more difficult. In addition, sales volumes of plywood products decreased compared with the corresponding period the previous year. The demand for sawn timber picked up as a result of an increase in demand outside Europe compared with the corresponding period the previous year, but the profitability of sawmill operations improved only moderately. The demand for processed products is being affected by the recession in European economies and oversupply. In addition, the delay of the high season impaired sales in the first quarter compared with the corresponding period the previous year. On 11 March, Metsä Wood announced that it had agreed on divesting the shares of Metsä Wood Merk GmbH to the German-based Ed. Züblin AG Group, which is part of the Strabag Group. The parties also agreed on long-term cooperation to provide products to each other s solution ranges. The finalisation of the transaction was subject to the approval of the German competition authorities, which was obtained on 28 March. The transaction was closed on 22 April After the review period, Metsä Wood announced that it will initiate an efficiency programme. The reasons for this are the weak development of profitability over the last few years and the declining sales in the main market areas. The programme aims to secure Metsä Wood s competitiveness and achievement of profitability targets in the future. Pulp Metsä Fibre s sales for the first quarter totalled EUR million (325.5) and the operating result excluding non-recurring items was EUR 47.3 million (42.5). The sales volume of pulp decreased by approximately 4 per cent compared with the previous year and amounted to 572,500 tonnes. Foreign currency-denominated market prices were 1 per cent lower for softwood pulp and 12 per cent higher for hardwood pulp on average, compared with. The market price of softwood pulp in Europe was USD 809 per tonne at the beginning of the period and USD 837 at the end of the period. The corresponding figures for hardwood pulp were USD 775 and USD 801. The improvement in Metsä Fibre s operating result was due to the positive impact of the change in pulp sales structure on mill prices and increased income from by-products.

9 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 9 (29) The investment of approximately EUR 15 million to develop the production process of Metsä Fibre s Joutseno mill is progressing. With the investment, the Joutseno mill will adopt a new pulp manufacturing process: polysulphide cooking. At the same time, the production capacity of the Joutseno mill will increase by nearly 10 per cent and production efficiency will improve. Metsä Fibre will launch a new type of softwood pulp on the market in June; its papermaking properties will allow customers higher cost-efficiency and runnability. A feasibility study to increase the use and production of renewable energy sources underway at the Kemi pulp mill is progressing. One possible production technology being reviewed is a gasification plant to produce biofuel to replace the fossil fuel used in lime kilns, i.e. oil. The feasibility study will be completed by the end of June Paperboard and Paper Metsä Board s sales in January March totalled EUR million (544.6), and the operating result excluding non-recurring items was EUR 30.2 million (6.1). Sales decreased as a result of the closure of unprofitable paper business operations and reorganisations. The operating result excluding non-recurring items compared with the corresponding period the previous year was improved by a significant increase in the delivery volumes of folding boxboard and linerboard, a decrease in the losses of closed and restructured units, and an increase in the prices of short-fibre pulp and chemi-thermomechanical pulp. The operating result was weakened by the lower prices of coated paper and the stronger Swedish krona, in particular. The market situation of the paper industry is difficult, and a programme aiming at annual cost savings of approximately EUR 15 million has been initiated in order to secure the cash flow of the Husum mill. New products offering higher profitability are being sought alongside existing products and also to replace them. An example of such products are the new lightweight uncoated liners, production of which started at Husum in April. Non-recurring items recognised in the operating result in January March amounted to EUR +4.6 million net ( 9.7), the most significant being capital gains and reversals of provisions of EUR 4.6 million related to the divestment of the Alizay mill in France. The operating result including non-recurring items was EUR 34.8 million (-3.6) in January March. Net interest and other financial expenses were EUR 24.3 million (16.9) and exchange gains/losses recognised in financial items were EUR -1.9 million (2.0). The period s higher financial expenses compared with the previous year were mainly caused by the early repayment of the USD-denominated private note issue. Excluding non-recurring items, the result before taxes for the period was EUR 3.9 million (-8.8), earnings per share were EUR 0.01 (-0.02) and the return on capital employed was 6.8 per cent (1.9). Including non-recurring items, the result before taxes was EUR 8.5 million (-18.5), earnings per share were EUR 0.02 (-0.05) and the return on capital employed was 7.7 per cent (-0.2). At the end of March, Metsä Board s equity ratio was 33.3 per cent and net gearing was 69 per cent (31 December : 33.2 and 73, respectively).

10 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 10 (29) In 2011 and, Metsä Board increased its folding boxboard capacity by 150,000 tonnes. The investments have increased the total production capacity to 935,000 tonnes a year. The entire capacity is available from the beginning of this year. Metsä Board s interim report was published on 7 May Tissue and Cooking Paper The January March sales of Metsä Tissue, a producer of tissue and cooking papers, totalled EUR million (243.5), and its operating result excluding non-recurring items was EUR 13.1 million (10.0). The slight increase in sales is due to a growth in sales volumes during the first quarter. In addition to the growth in sales volumes, the operating result strengthened as a result of changes made by the company to streamline the cost structure. The sales and result of the Baking & Cooking business improved during the first quarter, and the result is expected to continue its favourable development after the significant structural changes made in the organisation. SAGA products were launched on the Finnish consumer market at the beginning of the year. The Serla brand granted EUR 100,000 to the Nuorten hyväksi ( Let s Help Young People ) campaign as one of the main sponsors in January. The campaign collects funding for projects aiming to prevent the marginalisation of children and young people. Serla s participation in the campaign is extensively visible in media and Serla s product packaging. The support is part of Metsä Group s responsibility work, which focuses on children and young people. The cooperation negotiations carried out at Metsä Tissue were completed in the German functions. The new organisational and operational model is now in use in all countries. As a result of the organisational reform started in September, the number of Metsä Tissue s employees decreased by a total of 180. Risks and uncertainties The estimates and statements in this interim report are based on current plans and estimates. They involve risks and uncertainties that may cause the results to differ from those expressed in such statements. In the short term, the price of and demand for end products, raw material costs, energy prices and the exchange rate development of the euro have an effect on the results of Metsä Group. The risks related to the Group s business have been explained more extensively in Metsä Group s Annual Report for. Pending disputes In March 2011, the state enterprise Metsähallitus filed a claim for damages at the District Court of Helsinki, demanding that Metsäliitto Cooperative and two other forest industry companies jointly pay compensation for alleged damage caused by prohibited cooperation with regard to prices in the raw wood market. The claim is related to the 3 December 2009 decision by the Market Court which states that the aforementioned companies have violated the act on competition restrictions in the raw wood market. In addition, some municipalities, parishes and a group of individuals in Finland have instituted similar proceedings. The total amount of all claims that Metsäliitto Cooperative is aware of and that were directed at

11 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 11 (29) Metsäliitto Cooperative and the other aforementioned companies jointly is approximately EUR 236 million, of which approximately EUR 87 million is directed at Metsäliitto Cooperative alone. In addition, the aforementioned proceedings are associated with interest and value added tax claims. Metsä Cooperative s view is that the claims for damages are unfounded, and the company has not recognised any provisions regarding them. UPM-Kymmene Corporation launched arbitration proceedings in November, whereby it claims jointly from Metsäliitto Cooperative and Metsä Board primarily EUR 58.5 million in damages, and secondarily the return of a EUR 58.5 million claimed unjust enrichment. The claims are based on an alleged breach of the tag-along clause specified in Metsä Fibre s shareholders agreement signed in Metsäliitto considers the claim unfounded and has not booked provisions related to the claim. Events after the period Katrinefors Kraftvärme AB, a joint venture in which Metsä Tissue has a 50 per cent holding, announced in April that it will build a bioenergy plant producing renewable energy in conjunction with the Metsä Tissue mill in Mariestad, Sweden. The aim is for the new plant to be operational by the end of The total investment will amount to EUR 30 million. Metsä Wood announced in April that it will launch an efficiency programme. The reasons for this are the weak development of productivity over the last few years and declining sales in the main markets. The reduction of workforce is not expected to exceed 255 employees, of which an estimated 95 will be in Finland. Metsä Wood divested the shares of Metsä Wood Merk GmbH to the German-based Ed. Züblin AG Group, which is part of the Strabag Group, on 22 April The transaction did not result in any significant capital gains. Metsä Tissue signed a EUR 200 million syndicated loan agreement. The loan is a five-year credit facility to refinance the current facility maturing in September Metsäliitto Cooperative acquired on 2 May 2013 from Varma Mutual Pension Insurance Company all its holdings in Metsä Tissue Corporation, representing a total of 8.38 per cent of Metsä Tissue s share capital. Near-term outlook In Finland, demand for logging sites harvested in the summer continues to be good with respect to all timber types. There is also demand for wood harvested by the forest owner himself. Due to seasonal and economic circumstances, the market situation of building and industrial customers utilising wood solutions is expected to pick up during the second quarter. The spring season will also accelerate garden and yard furnishing. The utilisation rates of pulp mills are expected to remain good in the second quarter as well. The uncertain development of the European economy and the development of the euro against the US dollar in particular make it more difficult to predict profitability. Volumes of folding boxboard are estimated to improve slightly in the second quarter. Demand for linerboard is expected to continue to be strong and delivery volumes to remain

12 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 12 (29) at the level of the previous quarter. The delivery volumes of Metsä Board s papers are expected to decrease slightly in the second quarter for seasonal reasons. Metsä Board has announced new increased prices for both white-top kraftliner and uncoated fine paper. The steady growth in the demand for tissue and cooking papers is expected to continue. The completed development programme and organisational reform will further strengthen Metsä Tissue s competitiveness in the tightening market. Metsä Group s operating result excluding non-recurring items in the second quarter of 2013 is expected to be at approximately the same level as in the first quarter. Proposal for interest on members capital Metsäliitto Cooperative s Supervisory Board has decided to propose that the Representative Council convening today decide that, for, interest of 5.5 per cent (5.5 for 2011) be paid for the statutory capital invested by its members. Interest of 5.0 per cent (5.0) is proposed for additional members capital A, and interest of 4.5 per cent (4.5) for additional members capital B. In March, additional members capital C shares were converted into additional members capital B shares in accordance with the issue terms, so the interest paid on them will be determined in accordance with the decision on interest on additional members capital B. Espoo, Finland, 7 May 2013 Board of Directors For further information, please contact: Vesa-Pekka Takala, CFO, Metsä Group, tel (0) Reeta Kaukiainen, SVP, Communications, Metsä Group, tel (0) , +358 (0)

13 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 13 (29) SEGMENTS The figures for are restated Wood Supply and Forest Services 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales ROCE excl. non-rec. items, % Capital expenditure Personnel at end of period Wood Products Industry 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales ROCE excl. non-rec. items, % Capital expenditure Personnel at end of period Pulp Industry 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales ROCE excl. non-rec. items, % Capital expenditure Personnel at end of period Paperboard and Paper Industry 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales ROCE excl. non-rec. items, % Capital expenditure Personnel at end of period

14 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 14 (29) Tissue and Cooking Papers 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales ROCE excl. non-rec. items, % Capital expenditure Personnel at end of period Other operations 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items Capital expenditure Personnel at end of period Other operations include among others Metsä Group s service and holding functions as well as a 48.98% share of Metsätapiola s real estate operations. Internal sales and eliminations 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items Metsä Group 1 3/13 1 3/ /12 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales ROCE excl. non-rec. items, % Capital expenditure Personnel at end of period EBITDA = Operating result before depreciation and impairment losses. ROCE = Return on capital employed

15 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 15 (29) Quarterly data The figures for are restated Sales Wood Supply and Forest Services Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Internal sales Sales total Operating result Wood Supply and Forest Services Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Eliminations Operating result total % of sales Share of results from associated companies Exchange gains and losses Other net financial items Result before income tax Income tax Result for the period Operating result excl. non-rec. items Wood Supply and Forest Services Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations & eliminations Operating result total % of sales

16 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 16 (29) Calculation of key ratios Return on capital employed (%) ROCE Return on equity (%) ROE = (Result before tax + interest expenses, net exchange gains/losses and other financial expenses) per (Balance total - non-interest-bearing liabilities (average)) = (Result before tax - income taxes) per (Members funds (average)) Equity ratio (%) = (Members funds) per (Balance total - advance payments received) Net gearing ratio (%) = (Interest bearing borrowings - liquid funds - interest-bearing receivables) per (Members funds)

17 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 17 (29) FINANCIAL STATEMENTS Unaudited The figures for are restated METSÄ GROUP Condensed consolidated statement of comprehensive income, EUR mill. Note Change 1 12 Sales Change in stocks of finished goods and work in progress Other operating income Material and services Employee costs Depreciation, amortization and impairment losses Other operating expenses Operating result Share of results from associated companies Exchange gains and losses Other net financial items Result before income tax Income taxes Result for the period Other comprehensive income Items that will not be reclassified to profit and loss Items relating to adjustments of defined benefit plans Income tax relating to items that will not be reclassified Total Items that may be reclassified subsequently to profit and loss Cash flow hedges Available for sale financial assets Currency translation differences Other items Income tax relating to items that may be reclassified Total Other comprehensive income, net of tax Total comprehensive income for the period Result attributable to: Members of parent company Non-controlling interests Total comprehensive income attributable to: Members of parent company Non-controlling interests The notes are an integral part of these unaudited interim condensed financial statements.

18 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 18 (29) Unaudited The figures for are restated Condensed consolidated balance sheet Note ASSETS Non-current Goodwill Other intangible assets Tangible assets Biological assets Investments in associated companies Available for sale investments Non-current financial assets Deferred tax receivables Current Inventories Accounts receivables and other receivables Tax receivables based on the taxable income for the period Cash and cash equivalents Assets classified as held for sale Total assets MEMBERS FUNDS AND LIABILITIES Members funds Members funds Non-controlling interests Non-current liabilities Deferred tax liabilities Post-employment benefit obligations Provisions Borrowings Other liabilities Current liabilities Provisions Current borrowings Accounts payable and other liabilities Tax liabilities based on the taxable income for the period Liabilities classified as held for sale Total liabilities Total members funds and liabilities The notes are an integral part of these unaudited condensed financial statements.

19 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 19 (29) Unaudited Change in members funds Equity attributable to members of parent company Translation differences Fair value and other reserves Noncontrolling interest EUR million Members Retained capital earnings Total Total Members funds IAS 19 restatement Note Adjusted members funds Result for the period Other comprehensive income, net after tax Total comprehensive income Transactions with owners Dividends paid Change in members capital Acquired shares from non-controlling interests, which did not change the controlling right Members funds Members funds IAS 19 restatement Note Adjusted members funds Result for the period Other comprehensive income, net after tax Total comprehensive income Transactions with owners Dividends paid Change in members capital Members funds

20 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 20 (29) Unaudited Condensed consolidated cash flow statement 2013 Note Result for the period Total adjustments Change in working capital Cash flow arising from operations Net financial items Income taxes paid Net cash flow arising from operating activities Acquisitions Investments in tangible and intangible assets Disposals and other items Net cash flow arising from investing activities Change in members funds Change in shares of non-controlling interests Change in long-term loans and other financial items Dividends paid Net cash flow arising from financing activities Change in cash and cash equivalents Cash and cash equivalents at beginning of period Translation difference Change in cash and cash equivalents Cash and cash equivalents in assets classified as held for sale Cash and cash equivalents at end of period The notes are an integral part of these unaudited condensed financial statements.

21 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 21 (29) NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS Note 1 Background and accounting policies Metsäliitto Cooperative and its subsidiaries comprise a forest industry group ( Metsä Group or Group ), which operations are organized into five business segments: Wood Supply and Forest Services, Wood Products Industry, Pulp Industry, Paperboard and Paper Industry and Tissue and Cooking Papers. Metsä Group s parent company is Metsäliitto Cooperative. The parent company is domiciled in Helsinki and the registered address is Revontulenpuisto 2, Espoo, Finland. This unaudited interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, and it should be read in conjunction with the IFRS financial statements. The same accounting policies have been applied as in the IFRS financial statements with the following exception: Depreciation of machinery and equipment during the financial year has been specified further between the quarters where applicable in order to correspond with the allocation of the use of the economic benefit of the asset. From the beginning of 2013 Metsä Group has adopted the following new and amended standards and interpretations: Amendments to IAS 1 Presentation of Financial Statements. The major change is the requirement to group items of other comprehensive income as to whether or not they will be reclassified subsequently to profit or loss when specific conditions are met. Amendment to IAS 19 Employee Benefits. The major changes are as follows: in future all actuarial gains and losses are immediately recognized in other comprehensive income, i.e. the corridor approach is eliminated, and finance costs are calculated on a net funding basis. The comparative figures have been adjusted to IAS 19. IFRS 13 Fair Value Measurement. IFRS 13 establishes a single source for all fair value measurements and disclosure requirements for use across IFRSs. The new standard also provides a precise definition of fair value. IFRS 13 does not extend the use of fair value accounting, but it provides guidance on how to measure fair value under IFRSs when fair value is required or permitted. IFRS 13 expands the disclosures to be provided for non-financial assets measured at fair value. Annual Improvements to IFRSs , May ). The annual improvements process provides a mechanism for minor and non-urgent amendments to IFRSs to be grouped together and issued in one package annually. The amendments cover in total five standards. Amendments to IFRS 7 Financial Instruments: Disclosures. The amendments clarify disclosure requirements for financial assets and liabilities that are offset in the statement of financial position or subject to master netting arrangements or similar agreements. All amounts are presented in millions of euros, unless otherwise stated. This interim report was authorised for issue by the Board of Directors of Metsäliitto Cooperative on 7 May 2013.

22 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 22 (29) IAS 19, Employee Benefits. The new standard had an impact on Metsä Group s income statement and balance sheet in this interim report as follows: EUR million Old accounting policy New accounting policy Impact Balance sheet 1.1. Non-current assets Other non-current financial assets Deferred tax receivables Non-current liabilities Deferred tax liabilities Post employment benefit obligations Total members funds Balance sheet Non-current assets Other non-current financial assets Deferred tax receivables Non-current liabilities Deferred tax liabilities Post employment benefit obligations Total members funds Income statement Employee costs Other financial income and expenses Income taxes Other comprehensive result Items that will not be reclassified to profit and loss Items relating to adjustments of defined benefit plans Income tax relating to items that will not be reclassified Balance sheet Non-current assets Other non-current financial assets Deferred tax receivables Non-current liabilities Deferred tax liabilities Post employment benefit obligations Total members funds Income statement 1 3/ Employee costs Other financial income and expenses Income taxes Other comprehensive income 1 3/ Items that will not be reclassified to profit and loss Items relating to adjustments of defined benefit plans Income tax relating to items that will not be reclassified Note 2 Segment information

23 Metsä Group Interim Report 1 January 31 March 2013 Stock Exchange Release 23 (29) The Group's operating segments are comprised of the Group's business areas. The business areas produce different products and services, and they are managed as separate units. The operating segments are reported uniformly with internal reporting submitted to the chief operational decision-maker. The President and CEO has been appointed as the chief operational decision-maker in charge of allocating resources to the operating segments and evaluating their performance. The same accounting policies are applied in segment reporting as for the Group as a whole. Transactions between segments are based on market prices. The figures for are restated. Sales Eur million 1 3/2013 External 1 3/2013 Internal 1 3/2013 Total 1 3/ External 1 3/ Internal 1 3/ Total Wood Supply and Forest Services Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Elimination of internal sales Total sales Sales EUR million External Internal Total Wood Supply and Forest Services Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Elimination of internal sales Total sales Operating result 2013 EUR million Wood Supply and Forest Services Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Eliminations Operating result total Share of results from associates Financial costs, net Income taxes Result for the period Metsä Groups operating result 1 3/2013 includes non-recurring items net of EUR 5.2 million (-7.9). Of these EUR 4.6 million relates to the sale of Metsä Board s Alizay factory and EUR 0.6 million to reversed provisions from Metsä Tissue s efficiency program.